GM to pay $1.2billion to settle ignition switch case

[Express]

GM to pay $1.2b to settle ignition switch case


American automaker has reportedly agreed to huge payout and settled criminal case into ignition switch fault linked to 124 deaths.


September 17, 2015



General Motors has reportedly agreed to a deal with government officials investigating more than 100 deaths linked to faulty ignition switches. Photo: Jeff Kowalsky/Bloomberg


General Motors Co has agreed to pay $1.2 billion ($US900 million) and sign a deferred-prosecution agreement to end a U.S. government investigation into its handling of an ignition-switch defect linked to 124 deaths, two sources told Reuters.

The deal means GM will be charged criminally with hiding the defect from regulators and in the process defrauding consumers, but the case will be put on hold while GM fulfills terms of the deal, one source said.

No individuals would be charged in the criminal case, one of the sources said.

The company's expected $US900 million payment, confirmed by a second source, is less than the $1.6 billion ($US1.6b) that Toyota Motor Corp paid to resolve a similar case.

GM declined to comment. Spokeswomen for U.S. prosecutors in New York and in Washington also declined to comment.

The terms of GM's deal with the government were not immediately known, including how many counts the automaker would be charged with, whether the automaker agreed to hire an independent monitor, or how long it would need to abide by the agreement before the case may be dropped.

The agreement was expected to be announced on Thursday, the sources said. Any deferred-prosecution agreement would require court approval.

"I am very hopeful the Department of Justice will hold GM fully accountable and presses for an acknowledgement of responsibility as well as monetary penalties," Democratic Senator Richard Blumenthal of Connecticut said in a telephone interview with Reuters.

Shares of GM were up 31 cents, or 1 percent, to $US31.51 in after-hours trading.

GM, the No. 1 U.S. automaker, took charges totaling $US4.2 billion in 2014 to reflect costs associated with recalls, and a special fund was established to compensate victims of the ignition switch defect. It was not immediately clear whether GM would take additional charges to account for a settlement of the criminal probe.

MILESTONE SETTLEMENT

The settlement is a milestone in a case that over the past two years drove a transformation in the once cozy relationship between the auto industry and regulators in the U.S. government.

Outrage over the GM ignition switch case prompted a much tougher approach by Washington toward auto safety issues and compelled automakers to act more quickly and comprehensively to recall vehicles with potentially dangerous defects.

GM Chief Executive Mary Barra in 2014 undertook a series of actions to atone for the ignition switch failure, including appointing a new safety czar, overhauling GM's product engineering organisation, and pushing out 15 executives connected to the mishandling of the switch defects in a scathing report prepared by former federal prosecutor Anton Valukas, now a senior partner at the law firm Jenner & Block.

GM also recalled more than 30 million vehicles in North America in 2014 to fix a wide array of defects.

GM's approach contrasted with Toyota, which was slower to cooperate with regulators in response to defects related to incidents of sudden acceleration.

Toyota in March 2014 agreed to pay $1.6 billion to settle a charge that it concealed a problem in its vehicles that caused them to accelerate suddenly. That penalty remains the largest ever levied by the United States on an auto company.

PROBED SINCE 2014

Federal prosecutors based in New York have been investigating GM since at least March 2014 over the company's disclosures to regulators about vehicles equipped with the faulty ignition switches.

The ignition switches on Chevrolet Cobalts, Saturn Ions and other GM vehicles could cause their engines to stall, which in turn prevented air bags from deploying during crashes. Also, power steering and power brakes did not operate when the ignition switch unexpectedly moved from the "on" position.

Engineers and managers at Detroit-based GM learned of problems with the ignition switch more than a decade ago, but the first recalls began only in February 2014, despite years of consumer complaints.

GM agreed with the U.S. Transportation Department in May 2014 to pay a $35 million fine over its delayed response to the defect. Separate from the action by the Justice Department, the fine was the maximum the Transportation Department could impose.

Sources told Reuters in 2014 that the office of U.S. Attorney Preet Bharara in Manhattan was interviewing present and former GM employees as part of a criminal probe, and prosecutors were working on a set of mail and wire fraud charges similar to the criminal case that Toyota settled.

GM's Barra said in June that the automaker was cooperating fully with prosecutors and that any settlement would be on their timeline.

The automaker said in securities filing in July that it was facing related investigations by the U.S. Securities and Exchange Commission, 50 state attorneys general and the Canadian government.

OVER 200 CIVIL LAWSUITS

GM is facing more than 200 civil lawsuits over the ignition switch and other safety recalls from 2014, although the judge who oversaw GM's 2009 bankruptcy has ruled that claims related to the company's pre-bankruptcy conduct were barred.

Plaintiffs are seeking damages for deaths and injuries blamed on vehicle defects, as well as economic losses such as lost vehicle value. The first of the civil cases is slated for trial in January 2016.

GM funneled many of the injury and death claims linked to the ignition switch into an out-of-court settlement program run by Washington lawyer Kenneth Feinberg, who also oversaw compensation programs for victims of high-profile incidents such as the Sept. 11, 2001, attacks and the Deepwater Horizon oil spill.

The program received more than 4,300 claims and has found nearly 400 of those eligible for compensation, according to an August report from the program.

http://www.drive.com.au/motor-news/g...17-gjol5m.html

[burnz]

so the switch went from on to off, I wonder how much junk and fluffy toys were on said key rings...

doesn't sound right to me.

[99AUXR]

This ignition switch saga has been going on for ages now and is costing them mega dollars, look like it just cost them even more.

[SSD-85]

But GM will still be Mom & Apple Pie.

They can do no wrong.

[Franco Cozzo]

[99AUXR]

By the government....

[Pedro]

I always wondered what 124 innocent people's lives were worth. March on corporate greed.

[MethodX]

Quite a few car companies have had similar problems.
Ford with the famous pinto case, Bronco II rollovers, Explorer and the delaminating tyres.
Toyota with the ecu problems and sticking carpet mats.
Subaru with cruise control not disengaging, covering it up and executives going to jail.

[mik]

I wonder how many cars sold it would take to make 1.2 billion profit, that has got to hurt.

[Polyal]

Originally Posted by mik

I wonder how many cars sold it would take to make 1.2 billion profit, that has got to hurt.

Wonder if they cheaped out by 50 cents on the component..ouch

[vztrt]

Originally Posted by Polyal

Wonder if they cheaped out by 50 cents on the component..ouch

That's the exact reason why it happened. They saved a bucket load by using the cheaper ignition barrel.....well at the time.

Originally Posted by MethodX

Quite a few car companies have had similar problems.
Ford with the famous pinto case, Bronco II rollovers, Explorer and the delaminating tyres.
Toyota with the ecu problems and sticking carpet mats.
Subaru with cruise control not disengaging, covering it up and executives going to jail.

Chrysler's with the steering column (made to buy back cars).
Toyota with the front suspension failing and killing about 9 people.

Then we have the Airbag issue which effects all the Japanese car manufactures.

VW stalling motors.

[malazn mafia]

Originally Posted by mik

I wonder how many cars sold it would take to make 1.2 billion profit, that has got to hurt.

Aren't GM effectively Government Motors, so $1 tax from 1.2 billion Americans should suffice:..

[Crazy Dazz]

Originally Posted by Pedro

I always wondered what 124 innocent people's lives were worth. March on corporate greed.

I don't mean to seem harsh or uncaring, but people die in car accidents, it happens, only in American do you have this culture where everything must be somebody else's fault, AND you must be able to sue SOMEBODY for billions of dollars.
So you get drunk, get in your truck and drive without your seatbelt on, speed, roll your truck over and break your neck, winding up paralysed. Well obviously that is somebody else's fault, and you can sue the truck maker because their airbags didn't protect you from your stupidity. If that doesn't work, sue the government department responsible for the road, or the person who's property you rolled in to, or the bar that let you get drunk.

Many times, these corporations are NOT the evil monsters portrayed. Simple fact in the USA is that if you make a product, and sell it to the public, you WILL be sued. You can make toothbrushes, and somebody will sue you because a fellow-prisoner used one to fashion a shiv and stabbed them. So making allowances for law-suits and settlements is SIMPLY a fact of life, not an acknowledgement that your product is dangerous.

So what you basically have is a society where everything costs much more than it should, and the mass-tort lawyers and serial compo claimers become zillionaires.

[ken1939]

GM wont pay a dime, the US Taxpayer will.

As pointed out Government Motors.

[mik]

Originally Posted by vztrt

That's the exact reason why it happened. They saved a bucket load by using the cheaper ignition barrel.....well at the time.



Chrysler's with the steering column (made to buy back cars).
Toyota with the front suspension failing and killing about 9 people.

Then we have the Airbag issue which effects all the Japanese car manufactures.

VW stalling motors.

to be fair the airbag thing i believe doesnt just effect jap cars and was not forseen by the manufacturer of the bags.

also there was the fuel tank bursting into flames on chev trucks that could have been fixed by installing them inside the rails , but having a bigger fuel capacity was big sales plus apparently.

[2011G6E]

Oh...so the ignition "suddenly" changed position? Sure it did.

Is this going to be anything like the "Toyota suddenly accelerating vehicle" "problem" that was actually just idiots doing the wrong thing with their cars? Remember the very high profile one where a guy was in a Lexus with cruise control on and claimed it "wouldn't disengage" and was fearfully talking on the mobile phone until finally he crashed and died?
Everyone who saw the news report spotted the problem straight away...No one of course thought to say "HIT THE BRAKES, MORON...", or "TRY TURNING OFF THE IGNITION"...

How many more companies are going to be punished for the lack of interest in driving that their customers so blatantly exhibit...?

[Steve D]

From what I understand the ignition key issue was due to the weight of key chains hanging off the ignition key. How much is too much? 500g? 750g? 1kg? Some people have a lot of keys. Then the additional wear damages the lock to the point where the contacts bounce as the car drives along. Then those glitches on the ignition line confuse the airbag module leading to false triggering...

As for the Toyota unintended acceleration issue, if you have a high-end model with automatic transmission, push button start and 100% software between you and the drivetrain, then I wouldn't discount the reports.

[vztrt]

Originally Posted by mik

to be fair the airbag thing i believe doesnt just effect jap cars and was not forseen by the manufacturer of the bags.

No it doesn't. But about 90%. Really doesn't matter as that wasn't the point.